Financial Management: Principles and Applications, 13/e

Long description

Analysis of the Annual Cash Flows	Years 1–4		Year 5
Cash inflows
Increase in operating income	$0
Reduced salaries	$100,000
Reduced defects	50,000
Reduced fringe benefits	10,000
$160,000	$160,000
Cash outflows
Increased maintenance	$ (40,000)
Increased depreciation	(50,000)
(90,000)	$ (90,000)
Net operating income	$70,000	$70,000
Less: Taxes	(21,000)	(21,000)
Net operating profit after taxes (NOPAT)	$49,000	$49,000
Plus: Depreciation	50,000	50,000
Operating cash flow	$99,000	$99,000
Less: Increase in net operating working capital	0	0
Less: Increase in CAPEX	0	50,000	Note: Capital expenditures (CAPEX) are generally outflows and hence ...